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armenia

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ARMENIA


  
   

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 2,367 2,100 1,900 135
         
GNI per capita
 US $ 790 570 530 143
Ranking is given out of 208 nations - (data from the World Bank)

REPUBLICAN REFERENCE

Area (sq.km)
29,800

Population
3,326,448

Principal ethnic groups
Armenian 93.3%
Azeri 2.6%
Russian 2%

Capital
Yerevan

Currency
Dram

President
Robert Kocharian
 

  

Background:
An Orthodox Christian country, Armenia was incorporated into Russia in 1828 and the USSR in 1920. Armenian leaders remain preoccupied by the long conflict with Azerbaijan over Nagorno-Karabakh, a primarily Armenian-populated exclave, assigned to Soviet Azerbaijan in the 1920s by Moscow. Armenia and Azerbaijan began fighting over the exclave in 1988; the struggle escalated after both countries attained independence from the Soviet Union in 1991. By May 1994, when a cease-fire took hold, Armenian forces held not only Nagorno-Karabakh but also a significant portion of Azerbaijan proper. The economies of both sides have been hurt by their inability to make substantial progress toward a peaceful resolution. 

Update No: 278 - (01/03/04)

The Armenians are in a curious situation. They are very conscious of their European identity, having been the first people to convert to Christianity back in 300AD. They suffered terribly for their faith in 1915 when one and a half million of them were massacred inside the Ottoman Empire by the Turks. But, as Hitler said in 1938, "who now remembers the Armenian genocide?" He for one did and had another people in mind for the same treatment (actually two, the Holocaust involved Gypsies as well as Jews).
In many ways the Armenians and Israelis have a lot in common, with an extensive Diaspora, mostly in the West, a tradition of being good at science and learning, business and affairs, they have easily aroused resentment and scorn. Hence the genocides.
The natural solution to the security problem of Armenia would be for it to join NATO and the EU. But for various reasons that is not likely to happen at all soon. The most important is the sheer remoteness of the country in the southern Caucasus. Another is the nature of the recent history. Yet another is the dictatorial stamp of its regime, largely explained by these recent events. 

Historical perspective
From the moment of their independence in 1991 the Caucasus republics began to orient themselves in new directions away from Russia, towards Turkey for the Azeris, towards the West for the Armenians and the Georgians. Even the Chechens became restive to leave Russia, as is well known. But the Nagorno-Kharabak conflict soon brought Armenia back into the Russian fold, indispensable to its victory by 1992 over the Azeris in securing its enclave in Azerbaijan and a swathe of Azeri territory linking it again to the motherland, the Lachin Corridor.

The president of the enclave at the time was a certain Robert Kocharian, now president of Armenia. A hard-liner on the issue he remains and a loyal Russian ally. He approves of the heavy-handed Russian approach to politics and backs Moscow in its attempt to cling onto Chechnya, being a great clinger himself. This makes Armenia isolated in the Caucusus and certainly no candidate for NATO or EU membership any time soon.

The inevitable Russian bear-hug
Armenia, or rather its dictatorial and corrupt regime, is now out in the cold. It has been ruled out as a route for Caspian resources to flow to the West and is evermore dependent on Moscow. The Russian base at Bolshaya Krepost in Armenia will stay. Says Col Ashot Karapelyan, who serves at the base: "The Russians first came here in 1775 and our presence today is more important than ever. Without us the Muslims would overrun this area and in no time would be on the southern borders of Russia."
This vision has no appeal to the Azeris or Georgians, whose younger generations are learning English rather than Russian these days and see their future with the West. But the Armenians, albeit reluctantly, view the Russians as the lesser of two evils. With the Russians they sleep easier at night. As one Government employee puts it: "We are Christians in a sea of Muslims and Russia protects us. We'd prefer the Americans too, but they are so far away and Russia is just next door."

Economy booms
The one consolation prize for the Armenians right now is that they have a booming economy. GDP grew by 12.9% in 2002 and by 7.3% in 2003, led by industry, whose output rose by 14.9% in 2003. Foreign trade grew by 30% last year, with exports (34.2%) outstripping imports (28.6%).
All this may be just a bit too good to be true. The use of the decimal points is a trifle suspect. Even in the West the statistical figures come with an admitted large margin of error. Moreover, it is all from a very low base.
Russia's electricity giant - RAO Unified Energy Systems (UES), in which the government has a controlling share - has led the Russian charge so far in the Caucasus, acquiring large stakes in energy ventures in both Armenia and Georgia. It also has announced plans to export energy to Turkey and Azerbaijan. The company's CEO, Anatoly Chubais has been a leading advocate of the establishment of a Moscow-dominated "liberal empire" in Eurasia. 
On October 22, Chubais visited Armenia to finalize the deal with Yerevan. The fact that Chubais - who holds no official post in the Russian government, but who is a leader of a Russian political party - met with Armenia's top leaders, namely President Robert Kocharian, and Defence Minister Serzh Sarkisian, underscores the political dimension of Russia's aggressive move into the Armenian energy market. 
Talking to journalists in Yerevan, Chubais divulged some details of UES's blueprint for future expansion. Chubais said that Armenia would soon be incorporated into a Russia-led energy-supply network comprising 10 former Soviet republics, including Georgia and Azerbaijan. He added that UES, which currently controls 80 per cent of Armenia's power-generating capacity, wants to lease and repair high-voltage transmission lines leading from Armenia to Azerbaijan and Turkey. The aim would be for UES to export power to those two countries, despite the fact that both Baku and Ankara have antagonistic relationships with Yerevan. Chubais suggested that "political problems" should not preclude such exports, going on to hint that UES would not have difficulty in obtaining Azerbaijan's agreement to the Russian company's energy export plan. 
Chubais indicated the Caucasus offers an ideal "bridgehead" for UES's expansion into Turkey. He called Turkish market "fantastically attractive" in terms of wholesale prices for energy and development prospects. "The market is growing, promising a number of big projects, including some in the aluminium sector and other power-consuming industries," RIA-Novosti quoted Chubais as saying. 
Russia's near total control of Armenia's energy market has caused understandable uneasiness among experts at some international financial institutions. The transfer to UES of more Armenian energy facilities would be "undesirable," World Bank official Gevorg Sargsian told RFE/RL's Yerevan bureau on October 28. Sargsian stressed that "we have nothing against UES or any other foreign company," but the bank would prefer that other owners acquire power facilities that have yet to be privatised. 
The political implications of the UES's economic expansion are obvious. "Since we are not talking about the sale of cold drinks - electricity supply being vital for the people to have a normal life - Moscow is set to gain control over key economic sectors [in Armenia and Georgia], and over their overall existence in general," political analyst Yevgenii Arsyukhin wrote recently in the Russian government daily Rossiiskaya Gazeta. 
Chubais publicly denies that his company seeks political gains. "We do economics, not politics," Chubais said in an interview with the Russkii Kur'er newspaper. However, talking to the newsmen after a recent session of the CIS Council on Electric Energy, Chubais offered blunt comments on the need to restore Russia's undisputed supremacy in the post-Soviet Eurasia. "Russia should be strong. Period," he said. To shun a leadership role within the CIS, to try to "hide it," Chubais argued, would be tantamount to "hypocrisy." 
All along the way during its acquisition binge, Russia's political establishment has cheered UES. "Having once said that he is going to redraw the energy map of the world, Anatoly Chubais is steadily moving towards his objective," Anatoly Gordienko wrote in a commentary published in the Nezavisimaya Gazeta newspaper. "After it suddenly set up shop in Georgia, UES is now taking under its wing neighboring Armenia, putting out feelers with the aim to privatise energy sector in Ukraine and seeking to carry out its blitz in the republics of Central Asia." 
To those sceptics who question the feasibility of UES's expansion scheme, Chubais invariably responds with the following: "Don't worry, we have long hands."

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ENERGY

Armenia transfers Razdan plant to Russian ownership 


Russian First Deputy Property Minister, Dmitry Aratsky, and Armenian Energy Minister, Armen Movsisian, signed a protocol on the transfer of Razdan Thermal Power Plant to Russian ownership as payment of Armenian state debt recently, Interfax News Agency reported. 
Russian Deputy Prime Minster, Boris Alyoshin, co-chairman of the Russian-Armenian intergovernmental commission for energy cooperation, told journalists after the signing ceremony that Razdan Thermal Power Plant is the last of five companies being transferred by Armenia to Russia as payment of state debt. 
He said that Russia plans to evaluate the effectiveness of managing property in Armenia and establish possible investment programs to develop these companies. He said that these companies will more than likely be privatised. 
Alyoshin said that the commission discussed the development of transport corridors and the construction of a gas pipeline to supply natural gas to Armenia. "The gas authorities in Armenia and Russia have been instructed to study this project," he said. 
The co-chairmen of the commission also signed a protocol removing exceptions to the free trade regime between Armenia and Russia, thereby creating a most-favoured regime between the two countries. 

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FOREIGN ECONOMIC RELATIONS

Georgian president pledges to boost economic ties with Armenia


Armenian President, Robert Kocharian, has invited his Georgian counterpart Mikhail Saakashvili, to Yerevan.
The press service of the Armenian Foreign Ministry has told Mediamax News Agency that Foreign Minister, Vardan Oskanyan, passed the Armenian president's invitation on to Mikhail Saakashvili during a meeting that was held in Tbilisi after the new Georgian president's inauguration ceremony on 25th January.
Mikhail Saakashvili said during the meeting that he was ready to give a new impetus to Armenian-Georgian relations, placing the main emphasis on economic cooperation.
Vardan Oskanyan and Mikhail Saakashvili said that they were ready to establish close cooperation within the framework of Armenia and Georgia's European integration.

Armenian foreign minister, US secretary of state discuss Armenian-Turkish ties

Armenian Foreign Minister, Vardan Oskanya,n and US Secretary of State, Colin Powell, attached special attention to Armenian-Turkish relations during a meeting which was held in Tbilisi on 25th January.
The press service of the Armenian Foreign Ministry has told Mediamax News Agency that "Vardan Oskanyan and Colin Powell gave a positive assessment of the existing Armenian-Turkish dialogue and noted the US's important role in ensuring practical results of this dialogue." The Armenian and US foreign minister also discussed the situation in Iraq. Vardan Oskanyan confirmed that the Armenian side was ready to take an active part in the restoration of Iraq, in particular, in the technical and humanitarian spheres.

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FINANCIAL NEWS

World Bank to start 5 programmes in Armenia

The World Bank will introduce five new programmes in Armenia worth US$75m, Roger Robinson, the head of the bank's office in Yerevan, said, Interfax News Agency reported. The programmes will cover a three or four-year period. The World Bank board will look at healthcare, education, civil service, social and water supply programmes by June 30th, he said. The World Bank is carrying out 14 programmes in Armenia with a combined total of US$215m, he added. Fighting poverty remains the main task facing the government and the World Bank. Armenia's economic results last year inspired optimism but poverty remains high, he was quoted as saying.

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MINERALS & METALS

Armenia ups output of cut diamonds 31.1% 


Armenia produced 138.3 billion dram worth of cut diamonds in 2003, up 31.1%, Trade and Economic Development Minister, Karen Chshmaritian, said at a briefing, Interfax News Agency reported. 
Output increased 20.3% in 2002 to 133.2 billion dram, including a 20.5% increase in exports to 131.8 billion dram. 
Armenian diamond cutting companies acquired 130,000 carats worth of rough diamonds from Russia last year, although their quota envisaged 400,000 carats. The minister explained that this was due to "the liberalization of prices for Alrosa rough diamonds." Because of the high prices, companies bought only 35% of the quota. 
The minister said Armenia hopes to resolve its problem with rough diamond supply this year and is looking for new suppliers. 
Russian rough diamond supplies make up 50% of the Armenian market's requirement. Some rough diamonds are imported from Belgium and Israel. 

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PRIVATISATION

Armenia gets US$5m from privatisation in 2003


A total of 124 enterprises were privatised in Armenia in 2003, against 93 in 2002, the head of the State Property Department, David Vardanyan, said at a briefing, Arminfo reported.
A special account within the state budget received 2.9bn drams [approx US$5.1m] from the privatisation, of which 2.3bn drams came from the privatisation of enterprises, 204m drams from selling facilities under construction, and 388m drams from selling small facilities.
Vardanyan said that the process of selling small facilities intensified in 2003 because their prices went down. Facilities in districts of Armenia became almost 10 times as cheap and cost between three to five dollars per square metre. When this report was delivered, Armenian Prime Minister, Andranik Markaryan, said that privatisation in Armenia was not transparent enough and that he was unsatisfied by the assessment and methods of privatisation.
As of 1 January 2004, 1,860 small and medium-sized enterprises were privatised in Armenia, of which 15 were handed over to private owners after liquidation. In addition, 7,205 small facilities and 72 facilities under construction were privatised. As a result of the privatisation, the special account received 109.8bn drams [over US$193m], whereas the privatisation of small facilities accounted for 28.5bn drams, and the sale of facilities under construction yielded another 895m drams.

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